Q4 2021 PAR Technology Corp Earnings Call
[music].
Good day and thank you for standing by welcome to the fiscal year 2021 fourth quarter financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press.
Star one on your telephone please be advised that today's conference is being recorded if you require any further assistance first star zero I would now like to hand, the conference over to your speaker today, Mr. Chris Byrnes. Please go ahead.
Okay.
Thank you Jeanne and good afternoon, everyone. I'd also like to welcome you today to the call for part 2021 fourth quarter and year end financial results review.
The complete disclosure of our results can be found in our press release issued this afternoon as well as in our related form 8-K furnished to the SEC.
To access the press release and the financial details. Please see the Investor Relations and news section of our website at Www Dot <unk> Dot com.
Also wanted to be sure all participants today have access to our earnings presentation and business review slide deck that we will use during the call to better communicate the momentum in our software business. Unfortunately were experiencing a minor technical difficulty that should be resolved in the next few minutes to access the slide deck.
The.
The presentation slides will be.
Been furnished in the 8-K that we filed this afternoon.
Individuals' today on the webcast you'll have access for those just dialing in to the call. This afternoon.
I'm sorry, one second.
At this time I would like to take care of certain details in regards to the call today participants on the call should be aware that we're recording the call. This afternoon and it will be available for playback. If you ask a question. It will be included in both our live conference and any future use of the recording.
I'd also like to remind participants that this conference call includes forward looking statements that reflect management's expectations based on currently available data. However.
However, actual results are subject to future events and uncertainties and the information on this conference call related to projections or other forward statements may be relied upon and subject to the safe Harbor statement included in our earnings release, this afternoon and in our annual and quarterly filings with the SEC.
Joining me on the call today as part of CEO , and President <unk> Singh and Bryan <unk>, Chief Financial Officer, I'd now like to turn the call over to Stephanie for the formal remarks portion of the call, which will be followed by general Q&A Sidney Thanks.
Thanks, Chris and thanks to everyone for joining us to review <unk> fourth quarter and year end 2021 results.
As always there's a lot we wanted to share with all of you today in our prepared remarks, so we will kick off now.
During the fourth quarter, we continued to drive growth in our strategic recurring revenue platform and saw continued margin expansion as we begin to get the benefits of scale.
As a company we delivered a strong fourth quarter with reported total Q4 revenues of $81 6 million, a 39% increase from one year ago.
The revenue growth is driven across all business lines and specifically around our software recurring revenues, resulting in $88 2 million of total lives are at stake at quarter end and a year over year growth rate of 35% when adjusting for the <unk> acquisition.
This increase was driven by a 47% growth in <unk> coming from punch and 30% coming from break.
Contracted now.
Now totals more than $111 million as of December 31, paving the way for a strong 2022.
Equally important as we scale as the dramatic improvement, we have been able to driving gross margin within our subscription services revenue.
When new management stepped in a little over three years ago recurring revenue gross margins were well below 45%.
At the end of Q4, we're now at 70% and expect it to continue to expand over time.
This growth has been driven by intense effort on ROI focused engineering and improved <unk> architecture and economies of scale.
Our strong results this quarter were driven by a high level of execution across the business and continued demand for <unk> unified Commerce cloud platform.
We've established strong momentum continued to build on that throughout 2021.
In Q4, we activated 1075, new brink sites, a very solid number when considering two significant holiday periods in the quarter were very little if any deployments occur.
On a net basis aperture and brings total store count now totals nearly 15830 or 35% increase from one year ago.
Looking at total near 1200 stores in the quarter and saw improved cadence in Q4.
<unk> continues to report extremely low churn in this quarter was no different as churn was three 2% annualized.
Now turning to punch.
Continued to outperform with pension added more than 3200 sites in the quarter that now total more than 56000 sites at 36% increase in the last 12 months we.
We signed eight new customer logos in Q4 that added to our impressive contracted store list.
Loyalty programs are critical to the future of restaurant marketing.
So our marketing applications like pine should make it easier for brands to connect with our most loyal customers increased customer lifetime value.
Counts most.
The National Restaurant Association suggests that if restaurants are focused on increasing their order flow through phone or tablet.
Delivery online ordering or even your tableside Pos those restaurant businesses will struggle to compete.
With the rapid growth of digital ordering during the pandemic the demand for our leading loyalty App has never been stronger as the number of channels expand the need to understand customer LTV expands, thereby pulling more punch demand rests.
Restaurants are moving to understand individual customer lifetime value pushed NGL storage unit profitability.
We're also beginning to see momentum within the C store segment as the industry seeks a more robust loyalty solution similar to restaurants.
Par payment services pipeline grew significantly in the quarter and we were extremely pleased to recently announce the selection by smoothie King to use part payments engine in all 1000 plus stores.
We continue to see increased interest broadly across Britain.
If we can continue to see increased.
Interest broadly across the brink and punch customer basis, I am confident additional upsell and new customer opportunities were excited this year as more and more enterprise or <unk>.
Integrated payment offering from a trusted technology partner with competitive and transparent pricing.
As all of those things and more.
Although still early on.
So early in our payments initiative.
We have seen notable acceleration in our customer wins during 2021 and believe this revenue stream will be meaningful to our future financial performance.
Moreover, it has given our team confidence.
Excuse me and our ability to upsell new products.
Our product business continues to perform well in a difficult and challenging environment product revenues in the quarter continued to strengthen year over year and improved sequentially as well.
Product sales were reported at $32 2 million and this recently ended quarter at 48% increase.
The capital purchase environment for restaurants is always tricky and that has been even that is even more so during the pandemic and the global supply chain difficulties touched upon several end markets.
As I mentioned previously we are not immune to those challenges around the supply chain and we've experienced some margin impact with the costs associated with the current realities.
<unk> margins were actually able to expand margins over the year given the strong work of our operations and procurement teams.
The guidance supply chain, specifically, we will continue to diligently manage our partners and vendors through any shortages price inflation and increase in freight charges.
We believe we are uniquely positioned to create a greater diversity of supply sources, while at the same time technology, enabling operations and management of supply inventory.
We anticipate continued volatility in our sourcing channels and expect to closely monitor realtime upstream and downstream visibility across the supply chain to help us predict and plan for adverse events.
Now to briefly report on our government business in the quarter, we reported revenues of $18 8 million.
2% increase as compared to Q4 of last year.
With a large new contract we announced in November we anticipate acceleration in revenues in 2022 as task orders are assigned.
As a reminder, the U S Air Force Research Lab awarded a single award of 490.
$490 4 million IQ contract for counter small unmanned aircraft system work on software hardware and technical documentation. The award is a contract term of six year ordering period with additional two year order of performance beyond the original six.
We will recognize revenue as task orders are signed but we are seeing an immediate impact on our contract backlog that grew to $195 3 million at the end of Q4.
Direct result of the new contract award.
In addition to our accelerated revenue growth in 2020 to you will continue to seek out additional contract opportunities, where we can leverage our decades long experience and performance excellence specifics.
Specifically in value added revenue contracts that include direct labor and high Tech contract work within our Intel solutions business line.
Let me now talk a bit about where we see things going from a from a business perspective.
Looking back on my time at par, there's been significant progress in driving operational improvement and an accelerated focus on meaningful growth and innovation.
We believe that in order for a business to benefit all the stakeholders employees customers and suppliers its shareholders and its committees that business has to win winning to US is driving a very profitable business for a very long time.
While we are aggressively we are in an aggressive investment period, given the Tam we serve.
So constantly focused on driving operating leverage on every expense line of our recurring revenue cost items.
His focus has led to a dramatic growth in gross margin and demonstratable efficiency on our sales marketing R&D line.
In addition, we continue to solidify the senior leadership team, adding individuals with proven track records of delivering efficiency improvements cost discipline and growth.
We organized integrate our product engineering teams to bring needed focus on our unified commerce platform, while at the same time better structuring the organization to move quicker to address customer needs.
These changes are designed to foster collaboration across the entire product portfolio and establish linkages critical to bringing innovative new ideas to market quickly and cost effectively while ensuring we are aligned with the needs of our customers.
As we continue to make these organizational changes we recognized the need to maintain our focus on bringing operational discipline and accountability to the business, while realizing sustainable long term revenue growth.
As I mentioned earlier, a big part of this focus is on driving profitable growth specifically on our subscription revenue streams. Our goal is not only to grow are consistently but to drive operating leverage within every line of our P&L every single year. A great example of this is within brink. We're in 2021, we grew in excess of 30% while SG&A state.
Almost flat excluding our acquisition.
Combining this focus with a formulaic revenue model, we expect new customer signings, along with upsell and cross sell opportunities to deliver consistently 30% to 40% year over year <unk> growth and will help to find par as the industry leader.
While we've grown almost eight acts in three years, we're very cognizant that we're still at the very beginning of our transformation as is the industry that we serve our goal in building our unified Commerce platform is not to create a bundled solution, but to deliver our product back to the customer that puts the power back in their hands. We help our platform allows our customers to start focusing on vendor management and instead spend that.
Energy on delivering a unique customer experience.
In closing I in the park team wanted to center support to our team members based on Ukraine into their broader community.
Our primary concern is their safety and their family safety and we are monitoring the situation closely in contact with them to offer assistance.
I also like to thank all <unk> employees for their dedication and effort over the past quarter, we've gotten a few key items wrong and if you're wrong.
<unk> excuse me and a few wrong, but our continued focus on winning together has allowed us to move quickly when we veered off course and focus on our future.
It has not been easy, but it's working because we've done it together with.
With that I'd like to hand, it off to Brian who will review our financial performance in greater detail.
Yes.
Thank you <unk> and good afternoon, everyone.
Total revenues were $81 6 million for the three months ended December 31, 2021, an increase of 39, 4% compared to the three months ended December 31 2020.
Net loss for the fourth quarter of 2021 was $25 6 million or <unk>.
95 loss per share compared to a net loss of $13 million or <unk> 67 loss per share reported the same period in 2020.
Adjusted net loss for the fourth quarter of 2021 was $9 8 million or <unk> 36 loss per share compared to an adjusted net loss of $11 7 million or <unk> 54 loss per share for the same period in 2020.
Product revenue for the quarter was $32 2 million, an increase of $10 4 million or 48% from the $21 8 million reported in the prior year. The strong growth was primarily driven by hardware refresh investments our domestic tier one accounts.
Service revenue was reported at $30 6 million, an increase of $12 3 million or 67% from the $18 3 million reported in the prior year.
The increase was primarily driven by revenues from punch of $9 4 million, which included SaaS and related recurring services of $9 2 million and other services of <unk> 2 million.
Total SaaS and related recurring services reported in Q4, 2021 was $19 2 million compared to $8 $3 million in Q4 2020.
The company continues to expand our total recurring revenue base, which includes both software related services and hardware support contracts.
Of the $36 million of service revenue reported in Q4 2021, $25 6 million is comprised of recurring revenue contracts as compared to $14 7 million in Q4 2020.
Contract revenue from our government business was $18 7 million, an increase of $1 4 million or 2% from the $18 4 million reported in the fourth quarter of 2020.
The increase in contract revenues was driven by a $1 4 million increase in our product services product line.
We expect the 4400 $90 million I'd IQ contract announced in Q4, 2021 will help drive significant contract revenue growth in 2022.
Contract backlog continues to be significant noting a total backlog of $195 3 million as of December 31, 2021, compared to $150 5 million backlog as of December 31, 2020.
Now turning to margins.
Product margin for the quarter was 23, 4% versus 17, 4% in Q4 2020.
The increase in margins, primarily due to favorable product mix and favorable absorption of overhead costs due to the increased hardware revenue. We continue to monitor our pricing to properly reflect changes in our cost structure.
Service margin for the quarter was 32% compared to 12% reported in the fourth quarter of 2020.
Increase in margins was driven by nonrecurring charges taken in the fourth quarter 2020.
Service margin during the three months ended December 31, 2021 included $5 2 million of amortization of identifiable intangible assets compared to $1 6 million. During the three months ended December 31 2020.
Excluding the amortization of intangible assets service margin for the three months ended December 31, 2021 was 48, 6% compared to 28% for the three months ended December 31 2020.
This growth in margin was driven by our expanding software margins as <unk> commented earlier.
Government contract margins were six 7% as compared to eight 3% for the fourth quarter 2020.
The decrease was due to the billing rate adjustments within our ISR business line in the fourth quarter of 2021.
We expect contract margins to be more consistent with historical funded margins going forward in 2022.
GAAP SG&A was $24 9 million, an increase of $10 6 million a $14 2 million reported in Q4 2020.
The increase was primarily driven by $10 3 million in total punch operational expenses.
Which $3 9 million of stock based compensation.
It's worth noting that almost entire gross and SG&A came from the acquisition of punch and as <unk> mentioned, our intense focus on the profitable growth allowed us to expand break revenue year over year with minimal incremental investment in SG&A.
Net R&D was $10 million, an increase of $4 4 million from $5 $6 million recorded in Q4 2020.
The increase was primarily driven by $3 1 million for punch of $1 3 million related to additional investments in our other existing products.
Net interest expense was $5 6 million compared to $2 million recorded in Q4 2020.
The increase was driven by noncash interest charges related to 2027 convertible notes.
Net interest expense for the quarter includes $3 7 million of noncash accretion of debt discount and amortization of issuance costs.
As compared to $1 1 million for the same period last year.
Now to provide information on the company's cash flow and balance sheet position.
For the 12 months ended December 31, 2021 cash used in operating activities was $53 2 million versus $20 2 million for the prior year.
Cash used for the 12 months ended December 31, 2021 was primarily driven by an increase in pre tax net loss net of noncash charges and additional net working capital requirements, primarily because of an increase in inventory and an increase in both other assets and other current assets as a result of the <unk> acquisition.
Cash used in investing activities was $383 million for the 12 months ended December 31 2021.
Versus 9 million for the 12 months ended December 31 2020.
Investing activities. During the 12 months ended December 31, 2021 included $374 7 million of cash consideration in connection with the <unk> acquisition.
Capitalized software for the 12 months ended December 31, 2021 was $6 9 million was associated with the investments for various hospitality software platform.
Versus $7 9 million for the 12 months ended December 31 2020.
Cash provided by financing activities was $443 6 million for the 12 months ended December 31, 2021 versus $180 7 million for the prior year.
On April eight 2021, and we received net proceeds of $155 7 million for the private placement of our common stock and.
In addition to the net proceeds of $170 7 million from the term loan.
On September 17, 2021, we received net proceeds of $256 8 million from the offering of the 2027 notes.
At $52 5 million from our equity offering.
We used approximately $183 $6 million of those proceeds.
To repay the term loan in full.
The refinancing allowed us to save over $5 million in annual cash interest.
During the 12 months ended December 31 2020.
We received net proceeds of $49 5 million from our offering of the 2026 months.
It reflects our use of the $663 million to repurchase a majority of the 2024 notes and we received net proceeds of about $131 4 million for a public stock offering in the fourth quarter of 2020.
Inventory increase from December 31, 2020.
By $13 5 million.
We strategically increased our inventory on hand to mitigate supply chain shortages and delays, while ensuring we can service our enterprise customers' demand for installations, which resulted in historically high hardware revenue year.
This proved to be a smart investment as we were one of the few companies to successfully fill customer demand while operating in the supply chain challenged environment.
Accounts receivable increased $1 8 million compared to December 31, 2020.
Due to increased sales volume and punch acquisition offset by reduction in days sales outstanding.
Days sales outstanding improved within restaurants, and retail from 74 days at December 31, 2020 to 58 days at December 31 2021.
Days sales outstanding increased within government from 51 days at December 31, 2020.
To 55 days at December 31, 2021.
This concludes my formal remarks, and we'll now move to Q&A.
Sure.
Alright, so as a reminder to ask a question you will need to press star one on your telephone to resolve your question Mr.
Again that is star one on your telephone please standby, while we compile the Q&A roster.
First question comes from the line of <unk> Tandon from Needham. Your line is now open.
Thank you good evening guys congrats on the quarter.
So I wanted to see if you could maybe provide some thoughts.
On the trajectory in 2020 to maybe sort of reconcile the numbers that you shared with us and even though we're not giving formal guidance. How we should think about the growth between the various segments and I was thinking more in terms of hardware software and services on the restaurant and retail side.
Sure. So on the servicing side of what we do which is bring data central and <unk>.
We expect to grow 30% to 40% a year.
This year and every year going forward and there's lots of opportunities for that to go beyond that sort of where we are.
And certainly expect to be and.
And we expect that to be in that range for pine state essential will be slower.
Given that we're coming off of that in total we expect it to be 30% to 40% growth on the switching services side on the product side, which is the hardware business last year was a refresh here. So we won't I don't think we will have a massive growth year or an up year on the hardware side.
That's expected given last year was it was refresh here and then on the remaining set of services will have will have we will have growth.
Sort of.
Single digit type growth.
The remaining services.
But the key point I think is that the SaaS business continues to grow nicely, 30% to 40% and margin expanding as we've talked about the call.
So just to sort of surmise based on your comments is it fair to say that.
The total restaurant business can probably grow at least at a healthy low double digit space, maybe up understating it but just wanted to get some sort of.
Sense of like what we should be modeling as we look into the rest of the year.
Yes of course.
We don't look at so much as the restaurant segment as is what is our recurring revenue base growing versus the hardware side of it given that.
<unk>.
They're very different businesses, but if you combine the two absolutely.
Yes.
Got it and then just other.
Quick follow up in terms of investments the focus on Europe .
Your site in 2022 could you talk about what are the priorities for you and then maybe a timeline on the EBITDA profitability. When do you expect to hit breakeven or better still a profit on the EBITDA line.
Absolutely so from an investment perspective.
For us it's pretty clear if you look at the P&L. It's obviously, an R&D shop, that's building product and shipping product I would expect in 2019.
That investment in R&D to be coupled with strategic M&A, which we've talked about in the past and expect to do this year and Thats why I think you'll see that.
From a breakeven perspective, we expect to hit next year.
And as I said, we have all the levers to turn it on very quickly, but the goal is to continue to invest and grow.
Getting there and given the quantum of cash we have on our balance sheet.
We are really comfortable position to continue that investment, but as I mentioned as managers, where we are all targeted to grow <unk>.
While growing efficiency on every line of the P&L until we expect that to happen this year, which very comfortably takes us too.
We want to be in 'twenty three.
To be clear are you, referring to EBITDA profitability for all of 2023 or would that be sort of an exit target.
Before the exited 2023, so it wouldn't be at by the end of it wouldn't be for the full year, but within 2023.
Got it thank you so much.
Next one on the Q is Stephen Sheldon from William Blair. Your line is now open.
Hey, Thanks, guys.
Congrats on the smoothie King payments win.
It seems like a big win for you guys you talked about some of the prepared remarks, but how are conversations going there with other potential enterprise clients to <unk>.
Substantially doctorate payback solutions and test this win.
Potentially give you more ammo to go after that opportunity I guess it is kind of a reference point for other customers and then <unk>.
Stepping back what are you targeting I guess, if you think about the payment side as you think about the next call. It two to three years.
So.
On your first question.
Absolutely I think when we've talked in the past, we never thought we'd be in the market for the enterprise account for something this large.
We feel really good let the economics there.
And so it certainly gives us the confidence that we can sell our solution not just too smaller concepts, but many lives constant we work with and we'll push us more aggressively.
But it also gives us a lot of confidence to push even more down market, where margins are even better for us and payments. So we.
We feel really really good out of payments.
We've always been cautious here, but given that when it certainly made a lot of people wonder.
Why they did it and obviously we were super competitive, but the solutions that the entire solution was very attractive to them and I think it will be for many other customers. So as our customers roll off their existing contracts that we expect to be in the mix for their business and.
And continue.
How do we look on the next two three years, we wanted to be a very large portion of our revenue.
It's still small in.
As revenue rolls out you'll get to see the velocity of installs, which is much faster than our point of sale and sell if you will.
But we expect it to be a meaningful contributor revenue two to three years from now.
This year, we'll see.
It will be at the core driver of <unk> growth. This year. So in addition to break growing from a site day this will drive tremendous growth.
That's the only things that payments in my mind is that it actually helps all parts of the business because it allows you flexibility and winning a deal by offsetting potential capex cost for hardware, which accelerates deployment, maybe pulled rfps for it and so it has a lot of a lot of parts of the payment that make it very attractive but in the short run we expect it to grow considerably next couple of years and then become.
A very large portion of revenue in 2000.
In 2020.
324 going forward now.
Now I don't think we will be in a.
A situation, where it's 80% of revenue like it isn't some of that down market comps, but.
There is no reason that.
In time be.
Very meaningful relative to our point of sale software revenues.
Got it yes, it's good to hear and that's that's really helpful color.
Maybe shifting I guess curious where we're at in terms of Athene restaurant owners and operators may be shifting focus from.
Predominantly front of house solutions over the last few years, maybe looking once again at adding data central for back half.
Back of House solutions.
<unk> growth for the central has been a lot lower than brinker punch, but curious how you're thinking about data central.
In 2022, and 2020, given what Youre seeing and maybe the current pipeline there.
It's early we've got some good wins in the first two months of the year and we've got a great New leader, who has been driving a lot of change there very early on I think what's exciting about back office is good back office to the restaurant has not been nearly as innovative as the front of house and obviously the pandemic.
Even more glaring.
Would expect us not only to.
To grow organically, but also look at some inorganic opportunities. We think there's a lot of room to configure out there. It's too early to say if there will be a great year or an okay year.
But.
We are seeing that increased focus and with revenue growth returning in Q4 and some of the wins that we've had.
It'd be a good year, but it's a little bit too early to say it'll be about your.
We will see after we printed Q1 in April we'll have a good view of where we are.
Great and then just one more quick one I think you may have given contracted <unk> for the first time this quarter.
I think you've given it for punch before but it seems like given the step up it may be.
Is that is that for all three of the SaaS businesses combined is that how we should think about that the 111 million that's correct.
That's exactly right, so thats truly under contract.
That hopes and dreams that signed deals across all the businesses, which makes us very excited about.
You can underwrite a very decent growth rate, even if we didn't grow that at all year over year.
Got it great. Thank you.
Thanks, one on the line is Samad Samana from Jefferies. Your line is now open.
Okay, great. Thanks, guys for taking my questions maybe one just.
As a follow up on the guidance I appreciate kind of putting some guardrails there, but 70 does that include I know you said that it is.
Around your contract revenue does that include payments contribution or what payments be incremental to that 30% to 40% <unk>.
Hey, let's stay within their in payments would be the lever for us to get to the high end of that or surpass that.
As you've heard very.
<unk> project out our payments revenues as we were and you do it but.
When we began.
California would be the driver of that contracted air number growing.
On a month over month.
Okay. Okay. That's helpful. Because you answered what was going to be my follow up which is what is really the delta between the 30 to 40 and the range and I know that we're still in a relatively unpredictable world, but it sounds like you have a fairly comfortable clean line of sight on just the software part of it and if we layer in payments that could.
Really.
Maybe a stronger demand environment.
Turbocharger to the high end of the range.
Is that a fair representation of what you said.
Yes, that'd be very simple way to look at it and I think thats the right way to look at it.
Okay. Okay, and then just I appreciate you speaking of additional disclosures the additional margin color as well in the Investor presentation. Brian I was wondering is there any type of seasonality that we should be aware of on how those software gross margins will move around from quarter to quarter or how should we think.
Maybe.
The trajectory of that I know there is 2019 versus 'twenty is different because of the timing of customers going live in the revenue mix, but just on baseline off of that <unk>, 70%, how should I think about that going forward.
Yes, there's no seasonality in the actual margin throughout the year, what we experienced during last year was we saw significant improvement in our margins mature in our brake business and how we were able to manage the cost per site in there and so we exit the year pretty strong and so youll see that increase.
Throughout but.
Expecting continued to see improvement in that especially as we add product mix shift.
More on the SaaS growth within within the subscription services.
And some continued improvement on the actual cost themselves, but no seasonality.
Great and then just last question for me when I think about the core subscription <unk>. How are you seeing are for standalone deals for par.
<unk> versus <unk>.
Punch in and maybe what are you seeing on a consolidated basis. We're doing are multi product type of deal how does that compare to maybe the historical RVO.
Great questions. So on the brake side, we did raise prices, leaving 2021.
Double digit.
And I don't want to disclose it for that reason, we didn't raise prices double digits on the print side for new deals are being quoted.
Higher and importantly, we have also.
Sort of been able to bring in deals across all products now.
Generally we don't we're not in the business the bundling for a discount.
What we'll do is packaged the deal for accelerated deployment.
If the customer buying up the product with a traditional multi year deployment.
The artwork Holistically nicely and we've got a couple of great examples of that.
We're in the business of selling for value not accounting for costs.
Can it continue so across the product lines <unk> has no significant price increase followed by punching in data central So and we are raising prices and even though we don't focus on it a lot I mentioned on the call, but even in this crazy supply chain environment.
We expanded margins pretty considerably on the hardware side and a lot of that was cost measure but without the.
Through price increases.
Great very helpful. Thank you guys.
Alright, again, if you would like to ask a question. Please press star one.
Next one on acute is George Sutton from Craig Hallum.
It is now open.
Thank you we're coming up on a year since you acquired punch and one of the areas of enthusiasm. When you did that was they sell at a headquarter level versus the more regional.
And franchise level that you typically sell at point of sale I'm curious if you can kind of give us a sense of how that combination is starting to work to your cross selling fever and could you also just let US know what general do you see as the sales cycle for both sides of the business relative to now this one year of ownership.
Yes sure.
First to your question.
Finally at the corporate level versus the franchisee level.
It's an amazing experience for us to sort of when a deal would be rolled out in six months another asset.
Take it Paul.
Is it possible that if all tanker supply we like it so much and think there's a lot to do with it.
Brink is still when the corporate deal and then convert the franchisees where youll see that change George is when we finish the release of our unified platform, which will be a new product in and of itself that comes as one and so until that happens it will still be like that.
But it certainly I said on the last question whats, helping US is when we are able to sell the value of the solution combined upfront and there's a lot of value in having all the products.
One is we're able to then pull in rfps that before we'd be out a year and saying Hey, if we do this now here the benefits inflation that you can get so it's being felt that way.
So that's how it's handled today, but I think what we're excited about is when we come out with a unified platform the ability to leverage the punch model as the model as.
Opposed to the current point of sale model, which is.
Much longer rollout period.
Got you.
Secondly.
Happy to tell you. If you haven't heard we are leaving the pandemic era and moving towards an endemic era and that means we're going back to restaurants and sitting at tables, and you had been ready to really launch or table service offering a couple of years back can you just give us an update on that part of the opportunity.
Yeah and hold hold on that question hopefully diagnostic late in the year, but.
Looking at some creative solutions to help solve the table service challenges, though.
Things like QR code entering things like payments.
I think our solution were robust in that market. We agree with you we think it's a great opportunity.
And I think one of the.
One of the things that we're also very cognizant of it as the economies, particularly head towards a recession or an economic slowdown.
Existing base is the best place to be at that market tends to take share during challenging times.
It's more technology and so we feel pretty good on both in the sector.
Current assets into this market in a very creative way, which we'll talk about later in the year.
Great. Thanks, guys.
Thanks, Joe.
Next one on the line is Adam Wyden from <unk> capital. Your line is now open.
Hey, guys couple of couple questions Bill.
Building on what some mob.
You know when I first met.
No.
Yes.
Made some real gasoline is as it relates to price them now I won't call out any specific tier one chain $50 a month, but can you talk a little bit about.
<unk>.
How do you rectify.
Previous management's daphne's as it relates to pricing.
What's the cadence of kind of bringing those guys up to market.
Yes.
<unk>.
No.
I guess another thing people criticized call a little bit, but you havent gotten up into the super tier ones can.
Can you talk a little bit about how you kind of focus on these kind of 500 to 1000 unit change.
<unk>.
Not ripping out other or point of sales actually value technology are willing to pay the right price and arent going to rape you over the calls I mean in that.
Super tier ones on kind of both.
The bottom end of the funnel can you talk about kind of the pricing strategy on existing.
How do you think about going after kind of growing pricing and pricing nodes.
The cadence of all that.
Sure.
Got it.
But I think I got it all.
First on the pricing side.
It's a great question and I should add my comment about.
Premiums being leather pricing is also a big lever for us this year.
'twenty one we suffered from the low priced deals that were committed two years ago and rolling those deals out and so while we had good activations. The ARPA was lower because we are rolling out all deals. This year as I mentioned, we put through some significant price increases on your customers to make up for the new environment that we're in but in addition every single deal.
Is.
It's now gone through a.
A very formal <unk> process, and we feel very very good about our ability to raise price, but most important part of raising pricing.
In any business is as a customer getting value and with great candidly being stable and working and.
As you can see from the dramatic growth in break margin products is working right now and as a result, we're able to go back to customers demonstrate the value density the quality of the product and we are not having challenges raising price.
In Q4, we raised we began our first set of price range.
Existing customers and we had no pushback and we had no pushback because we have a great product that has been underpriced and we expect to continue that this year across the product pipeline.
Our pilot as well to the funds product, which in and of itself.
How does the same sort of continental hustle type deals that we'll address.
Does that answer your question.
Yes.
Basically what Youre, saying is that you will start getting as you demonstrate the value that you're creating for folks I mean, it was hard to raise prices on guidance.
Net promoter score was down but you've invested a lot of money in technical bed and making sure. The product is working and so look what NCR is targeting six to 8000 from a cloud point of sale.
There's a lot of there's a lot of distance between what our average outcome for brink is in kind of what other people are charging but.
It's an iterative process and I realize I forget your second question, which was the tier one versus tier twos and one of the things that payment has opened up for US is this tier two market is extremely juicy for us.
We win really well in and not only get to sell drink punch and data central but you saw a very healthy payment product, which actually accelerate the point of sale. Because you can then offset hardware capex with payments and so we're very very excited to be much more aggressive in that market and it is a really healthy customers that are growing.
But we do we are in processes with large tier one accounts and expect to win there too. So it sounds like we are.
Those markets at all.
But we feel really really good about that sort of call. It a few hundred stores up to 5000, where theres a lot more activity from an RFP perspective, we feel very very good about that space.
That's my last question and by the way to the extent that you win these tier ones and I know you've got Super tier one.
Hope that we get the multiples of Karen Sammon pricing.
Honestly the value is the basketball when a public people can cards six to eight turns then we clearly can charge. It so let's just keep that in mind.
My second question last question is when.
Do you think about.
Nope.
Kind of ecosystem and I call it kind of.
The restaurant software modules I think about blinking called the brain and then I think about all the little module is underneath that break as of March.
<unk> itself is the brain, it's Microsoft Windows, and then all of the programs underneath it all like Microsoft Excel Powerpoint, you need windows to run those but the irony is the pricing power in the <unk> opportunity on the excel and Powerpoint is very very high and when you see <unk> you see all these things and what we kind of.
Chicken soup with all the different things, we get to a <unk> that is substantially higher than kind of where we are right now and let's say 25, we're getting into numbers closer to 50000. When you include payments can you talk about you talked a little bit about table service.
There's renewals there is online ordering.
Drive through those kiosks.
A couple of spot bridge.
We're hearing people.
1000, 20000 for that I mean can you talk about how you're thinking about the internal development of these modules.
Because it's like the.
Brent This is very hard to get it it's hard to get and it's hard to get out, but it's much easier to solve these value added modules to existing customers can you talk about kind of the organic and inorganic initiatives that's going to bridge the gap between the 670000 that we have now with the <unk>.
Absolutely I mean, I think thats the entire thesis of the company as I mentioned.
We're going to grow a very comfortably 30, 40% a year and thats about what I call. This the very aggressive about soma.
Emotion and.
We think there's a ton of innovation to have the kind of product to sell and before all this innovation happens so.
I mentioned, the early but obviously theres a lot happening just ordering rail.
That sort of front end, but there is also an immense amount to happen in the back office, the kitchen and the team management parts of the world and so we will be aggressively inorganically and organically investing to get after that.
And as you said ironically as we sell more product it becomes easier to sell the next product and so it becomes reflective in nature and we feel very good about it and as I said the most.
It's been incredibly exciting to see how much payments momentum we've gotten so quickly, particularly in these large customers.
It also shows how much more we should be upselling across the base because we've been successful in one product.
Alright next one on the Q is and soderstrom from Sidoti. Your line is now open.
Alright, Thank you for taking my questions.
Just wondering and curious about the installment you said its slow down a little bit.
In the fourth quarter holidays, they had a very strong third quarter.
Should we expect from the first quarter and a couple of upcoming quarters.
It's David.
But generally Q4 is a slower activation quarter because of the holiday period, you don't you don't touch the stores or in those periods of time.
<unk>.
10 days are installed.
And lots of planning and so on and so forth.
Expect to be a good quarter and activation.
The goal this year is to combine strong activations with our progresses.
The last caller mentioned and so that that <unk> gets us to that 30% to 40%.
Very very comfortably so I expect us to be.
Our higher than our current cases and going forward.
And but combine that now with <unk> growth, which is a big theme for us this year.
Okay. Thank you and you mentioned.
Our company and are looking at M&A opportunities. What are you seeing there in terms of the opportunities and valuation levels in this market.
It's very dynamic, obviously with SaaS selling off and Thats being part of that it may be M&A frame it a little more challenging but not nearly impossible. We feel still feel very good about some of the stuff. We're working on I would say in the last week or two we have seen the private market valuations finally start to tick downward.
<unk> markets, which is very very exciting for us so.
So we can't talk too much about it but we've been very open that we built on really strong M&A team. We feel very we feel great about the successes have a punch. Obviously you can see from the numbers, but also from the culture the team the cause.
Our ability to promote both from punch and Brent can cross car and we feel like we're a great home for a lot of these businesses that are now running without potentially the VT treadmill in internet traffic recession part is a great home for a lot of businesses and so we hope that this change in many ways is very.
Beneficial for par.
Okay. Thank you that's all for me.
Alright, again, if you would like to ask a question. Please press star one.
Okay.
And there are no further question on the queue Sir.
We just like to say.
Thank everyone for participating on today's call and then enjoy the rest of the evening. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Okay.
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